Madhya Pradesh to junk CST offer

Madhya Pradesh has decided to protest against the goods and services tax (GST) by junking the Centre’s offer for a 100-per cent sales tax compensation. The state, according to top executives, would stick to its stand. The Centre had recently offered full compensation on central sales tax if states agree on GST.

“The Madhya Pradesh government only can thank them for their offer (of CST compensation) but the state will dump it if necessary. The state hardly has to recover Rs 100 crore as CST compensation. The state has other sources to generate revenue from. It is the case with most of the states. None will buy this idea, since losses after the GST regime would be more,” said a highly-placed official in the Madhya Pradesh government.

State authorities, including Finance Minister Raghavji, have opposed the Centre’s move to introduce the 115th amendment to the Constitution for a GST system in Parliament. Madhya Pradesh had triggered protest against the GST since it was conceptualised and has yet not agreed on two provisions that steps on the state’s constitutional powers to impose taxes.

“Do they think states have no calculations on tax losses? If they introduce GST, it would be a huge loss to all states in terms of tax share. It will also trigger immediate inflation and strip off states’ power to levy tax. They can justify it in any way but their calculations on widening the service tax base is based on false data and calculations,” the source said and added, “They will have to follow the Madhya Pradesh model, which has already been floated to an empowered committee. They have no option left.”

The state has opposed two points which the Centre has ignored. The first is a proposal to establish a council that will recommend tax administration and taxation in states. The state legislative assembly would have no power to reject those recommendations. Secondly, the bill will subsume all taxes including taxes imposed by local bodies like municipal corporations.